Commercial real estate remains the one sector brokers cannot overlook in the current quarter, even as higher interest rates continue to reshape deal flow. Industry executives say the market is not freezing, but it is becoming more selective, with strong transactions still moving while weaker ones face delays, renegotiation, or refinancing pressure.
That view is gaining attention because commercial lending behaves differently from residential lending. The sector reacts more slowly to rate changes, but the size of the loans means even modest rate shifts can have a major impact on pricing, underwriting, and exit strategy.
Why commercial deals are still getting done
Higher rates are not closing the door on commercial activity, according to executives watching the market closely. Instead, they are acting as a filter that pushes weaker deals to the sidelines while allowing the best-capitalized and most defensible transactions to proceed.
“Higher rates affect commercial a bit, but not in a dramatic way,” said Mor. “CRE doesn’t react to changes overnight the same way residential does. What you’re seeing is more of a filtering effect. The strong deals are still getting done, and the weaker ones are being pushed out or reworked.”
That dynamic matters for brokers because it changes how listings are evaluated. Deals with stable income, strong tenant demand, and realistic pricing are more likely to attract debt and equity, while uncertain assets now require more time and more creative structuring.
Refinancing is where pressure is building
Refinancing has become the most sensitive part of the commercial market as loans come due and borrowers face higher borrowing costs. Large balance refinances can be difficult to structure when new debt carries a meaningfully higher rate than the original loan.
“Refinancing is probably where you feel it the most,” Mor said. “There’s a lot of debt up for repayment, and higher rates make some of those deals tougher to make sense of. But overall, the market is still moving. It’s just more selective again.”
That selectivity is especially important in quarters when maturity schedules cluster across office, retail, industrial, multifamily, and other property types. Brokers often need to help clients adjust valuation expectations, extend timelines, or consider recapitalization options when refinancing no longer pencils out cleanly.
What brokers should watch in this segment
The current environment rewards brokers who can identify which assets still fit lender criteria and which ones need restructuring. It also increases the value of market knowledge, because borrowers often need guidance on whether to pursue a sale, recap, or refinance.
- Assets with durable cash flow are still drawing interest.
- Transactions with weaker assumptions are more likely to be delayed or repriced.
- Refinancing risk is highest where debt costs now exceed the asset’s income growth.
- Lenders are focusing more heavily on borrower strength, occupancy, and sponsorship quality.
This means brokers who focus on commercial assignments need to be more active in underwriting conversations, debt placement strategy, and lender coordination. The deals that close are increasingly the ones that can survive closer scrutiny from capital providers.
The broader market signal for Q2
Xander Snyder, senior commercial real estate economist for First American, told Mortgage Professional America that the full effect of higher rates may not yet be completely visible across the commercial sector. That uncertainty suggests the market is still absorbing previous rate moves, rather than fully pricing in the next wave of refinancing challenges.
For brokers, that creates both risk and opportunity. Distressed situations may rise if more borrowers struggle to refinance, but disciplined deal selection can still produce closings in sectors with stable demand and conservative leverage.
What this means for commercial brokerage activity
The commercial side of the market is not moving at the same speed as residential lending, and that slower reaction can create a false sense of stability. In practice, higher rates are reshaping not only pricing, but also the type of deals that make it to the closing table.
Brokers who understand this shift are better positioned to guide clients through lender expectations, underwriting constraints, and refinancing pressure. The sector remains active, but in the current quarter, activity is increasingly defined by quality, structure, and the ability to make the numbers work under tighter capital conditions.
